Airlines to Offer Discount Rates on Competing Hotwire Web Site

A Web site partly owned by the nation’s biggest air carriers and set to launch this fall will try to beat Priceline.com at the game of selling discount air fares to travelers who can be flexible about the timing and airline.

The site, called Hotwire, will let users pick their destination and days of travel, and will return with the best fare it can find. Users will not get exact flight times and the name of the airline until they buy the ticket.

“Consumers don’t have to spend hours on research and check multiple sites,” Karl Peterson, Hotwire’s chief executive, told Reuters. The business model differs from Priceline’s in that consumers will not be asked to name their own price in a committed offer, Peterson said.

Before starting Hotwire, Peterson was a partner at Texas Pacific Group, a private investment firm that has owned stakes in Continental Airlines Inc. and America West Holdings Corp. These airlines plus four other major carriers are minority investors and inventory suppliers in San Francisco-based Hotwire, which has $75 million in funding.

They are UAL Corp.’s United Airlines, AMR Corp.’s American Airlines, Northwest Airlines Corp., Continental, US Airways Group Inc. and America West Airlines. The site may help airline revenue by being an additional channel for sales of “distressed inventory,” which would otherwise go to waste if not sold, said Brian Harris, airlines analyst for Salomon Smith Barney.

The carriers were still expected to list inventories on Priceline, analysts said.

Priceline shares fell $3.38, or 8%, to close at $36.81 on Nasdaq.